Fraudsters are underestimating the power of AI to detect fake IDs, according to a new report from Ondato, a London-headquartered technology company that streamlines Know Your Customer (KYC) and anti-money laundering (AML) processes.
Based on an analysis of millions of ID verifications carried out for its customers in 2022, Ondato found that ID cards were used in 52% of fraudulent verification attempts - far ahead of driving licences (29%) and passports (18%). According to Ondato, fraudsters most likely underestimate ID cards and incorrectly assume they are easier to duplicate than other documents. While recognizing a fake card is quite difficult to the naked eye, today’s AI-powered ID verification systems now give companies the power to spot the scammers with automated checks.
Opportunities for ID document fraud have grown rapidly in recent years as organisations moved their user onboarding processes online. The Covid pandemic further accelerated this trend. To deal with the threat, governments and regulators have introduced - and regularly updated - requirements to prevent illegal activities, particularly around money laundering for crime and terrorist financing. Criminals are estimated to launder up to $2 trillion globally annually and, in one year alone, global banks were fined $10.4 billion for money-laundering violations. However, strengthening security compliance with AML regulations also creates a burden on onboarding processes which can slow down sign-up and prevent new users from signing in.
Liudas Kanapienis, CEO and co-founder of Ondato, says: “Ondato’s report highlights the frequency of fraud attempts but also the ways in which high-quality AI verification can catch fraudsters out. AI can deal with even sophisticated threats including biometric spoofing and photo and user replay video attacks. To meet the threat, companies need automated AI solutions that protect against fraud and make processes more efficient.”
Any industry covered by AML regulations is a potential target for fraudsters. As well as banks and other financial institutions, this can include cryptocurrency marketplaces, gambling services companies, lawyers and notaries, accountants and audit advisors, auction houses and antique dealers. The penalties for non-compliance with the European Union’s 5th AML Directive (5AMLD), for example, include fines of up to €5 million or 10% of annual turnover, and intense reputational damage.
Other key findings in the new report are:
- Brazil and France recorded the highest number of fraud attempts of any country, with one in 20 user and customer onboarding applications based on fake ID.
- Fraudsters typically used cheap mobile “burner phones” in attacks, to get easy, fast access to public networks and disguise their real IP address.
- Mexican documents were the most commonly used in attempted fraud.
- Male users submitted the majority (69%) of forged documents.
Read more about the latest fraud trends: Ondato - Identity Fraud Report 2023.
